Government will lower growth rate factor of COE supply formula to zero per cent

Car and motorcycle buyers will have to contend with fewer certificates of entitlement (COEs) from next February as the Government removes a growth rate factor that has been part of the supply formula since 1990.

The Land Transport Authority (LTA) said yesterday that it will lower the vehicle growth rate from the current 0.25 per cent per annum to zero per cent with effect from February next year for COE Categories A (cars up to 1,600cc and 130bhp), B (cars above 1,600cc or 130bhp) and D (motorcycles).

It cited Singapore's land constraints and a commitment to continually improve the public transport system as reasons.

The LTA, however, is making an exception for commercial vehicle COE supply.

Its growth rate will remain unchanged at 0.25 per cent until the first quarter of 2021.

This is to provide businesses with more time to improve the efficiency of their logistics operations and reduce the number of commercial vehicles that they require, it said.

The Government had previously said it would not remove the growth rate component in the COE supply formula.

But in 2015, it reversed this by announcing that the growth cap was likely to go down to zero.

Motor industry players said such a move would push up COE premiums, especially during cyclically low-supply years.

Dr Park Byung Joon, a transport researcher at the Singapore University of Social Sciences, said the current 0.25 per cent growth rate represents fewer than 100 COEs a month.

"It should not have a significant impact on COE premiums in the long run," he said.

"In the short term, it may be a possibility that people show some irrational reaction of panic buying. But when the cap was cut from 0.5 per cent to 0.25 per cent in 2014, I did not observe such behaviour."

Mr Nicholas Wong, general manager of Honda agent Kah Motor, said the motor industry should be able to cope with the cut, although the impact may be felt more sharply when COE supply dries up towards 2020 on the back of fewer cars expected to be scrapped.

Meanwhile, the LTA said there will be fewer COEs available for all vehicles except motorcycles for the November to January quota period.

Overall, the COE supply will fall from 9,122 a month currently to 8,635.

There will be 6,108 COEs a month for cars, down from 6,200.

The Open COE category will have a quota of 1,025 a month, down from 1,080. This category can be used for any vehicle type except motorcycles.

Hardest hit will be the supply for commercial vehicles, which will plunge from 888 to 485 a month.

Motor traders expect the commercial vehicle premium to climb on the back of this huge shrinkage.

Motorcycle buyers, however, will see an increase in available COEs, with 1,017 certificates a month, up from 954.